Monday, 4 March 2013

Milton Friedman's Permanent Income hypothesis .....

When i used to teach International Business Environment to undergraduate students, i used to always tell them to test the best fit of theories as a project in their holidays. Then when the assignment mode of testing became a reality i used to give them theories to test and see if it holds good. The students gave excellent reports on one such theory i gave them to test. It was so tough to mark them, keeping the CGPA system of marking in mind. The theory i gave them to test was the Porter Diamond Theory of National Advantage, for which i divided them into groups and gave each group a different sector to study.
I was happy to see the amazing way the project was handled by my students, and realised that every classroom is a place where i teach and also learn.
Milton Friedman's theory about the permanent income hypothesis is a theory very close to my heart because it was the topic of my first class presentation when i was doing my Mphil course work. I was the only one who summarised the original words of the author, as during the presentations after mine i realised the other students had used text books to interpret the theory in an easier manner. The presentation was also tougher for me as that day the Head of the economics department was busy and instead of 45 minutes i had to finish in 15 minutes.
This theory is different from the other consumption function theories and i like it the best though i do agree the Keynesian Consumption function and the Relative Income Hypothesis(considering that keeping up with the Jones is so very common in day to day life) are also very apt. . But given a choice and money i would like to do a best fit of the permanent income hypothesis in today's world of non permanency of jobs, opportunities, areas of work becoming so varied and choices galore that is the norm ... and a permanent government job which is pensionable a rarity ....not that it was the norm then either ....... but yes times have changed and so have people and perspectives and HOW .... :)    

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